Reeves should use the Spending Review to make pay conditional on performance
If the public sector had matched the productivity improvements of the private sector over the last 15 years or so, Keir Starmer would have £100bn more to spend this year. Instead of reheated policies, it’s time for real reform, says Tim Knox
Keir Starmer, to his credit, has been making the right diagnosis. Six months ago he warned that too many people in Whitehall “are comfortable in the tepid bath of managed decline”. In March he pointed out that the government employs more people than it has ever done but delivers the weakest value, and called for a “fundamental reform” of the British state.
He has, indeed, been the strongest critic of the workings of government since Margaret Thatcher. This week’s Spending Review is now his chance to deliver. But he should be aware that many of the policies announced so far are merely reheated versions of ideas that have been tried before, from firing the worst-performing civil servants (promised by Tony Blair in 2004) to moving officials out of London (a favourite of Gordon Brown).
Meanwhile voters are genuinely and rightly angry. Labour promised change but is not delivering the tangible results that people have a right to expect. So the NHS received an £8bn increase in spending last year, yet waiting lists fell by all of two per cent. At the current rate of progress the NHS will meet its target for hospital treatment (to see patients within 18 weeks) in 2042. The Defence Review is widely criticised for not going far enough. Infrastructure projects are failing, councils are going bust, public sector unions are demanding more pay. Is it any surprise that voters turn to the “none of the above” parties?
Productivity is the problem
Politicians are well aware that the underlying problem is our dreadful public sector productivity. Jeremy Hunt launched a review into the problem in the last months of Rishi Sunak’s premiership. Just last week Pat McFadden, the Cabinet Office minister declared that “we cannot just resign ourselves to lower productivity and the answer always being to hire more people”. On the very same day, Mel Stride, the Shadow Chancellor, identified the same problem and talked of his “vast ambition” to address the issue. Yet things just keep getting worse: the most recent ONS data show that public sector productivity has worsened still further over the last couple of years. And if the public sector had matched the productivity improvements of the private sector over the last 15 years or so, Keir Starmer would have £100bn more to spend this year – more than enough to fund higher defence and NHS spending, and to start to plan for the looming demographic challenges. And he would be able to deliver the high performing services which we all want.
So it should be becoming increasingly clear to everyone in Westminster that a few more reheated policies to drive government efficiency will have no real impact. No, it is now time to acknowledge that Whitehall and the management of public services are far below what we have a right to expect and that tough action is needed. Not words or targets. But real reform. And the Spending Review should have been the perfect opportunity to do this as this is the time when Ministers can set conditions for the money that the public sector spends. Imagine how different things would be if the Prime Minister were to say later this week that spending increases are conditional on having effective management in place in government departments and in public services. And to be effective this must include appointing new chief executives for government departments recruited from outside and with extensive experience in changing both the culture and operating practices of large organisations. They should also have generous incentives both to improve performance and to save money.
No pressure, Prime Minister, but this is your big chance to deliver the reset of government that the electorate is crying out for. And that the country needs so badly.
Tim Knox is editor of the Effective Governance Forum www.egforum.org.uk